Leasebacks release agribusiness capital

SALE and leaseback deals could become a bigger feature on the Australian agribusiness landscape with market conditions “perfect” for such investments, according to a new Colliers report.

The rural sector has been slower to adopt leaseback plans than other industries, said Colliers International national rural and agribusiness director, Tim Altschwager, but a lower dollar and interest rates could reverse this resistance.

With 99 per cent of the approximately 134,000 farm businesses in Australia family owned and operated, Mr Altschwager said emotional attachment to the land was definitely a consideration.

“By becoming both the lessee and the seller, the owner-occupier negotiates from a position of strength ”

“Farmers are reasonably private business people who enjoy the security and control of land ownership – they have not been prepared to manage landlords,” he said, noting that the younger generation of farmers were more open to alternative structures such as sale and leaseback.

But with the Reserve Bank cutting interest rates for the first time since August 2013 to a record low of 2.25 per cent and the Aussie dollar trading down 1.8 per cent to US76.60c on Tuesday afternoon, Colliers expects to see more sale and leaseback arrangements, particularly in post-farmgate infrastructure businesses.

While investors were typically attracted to high yielding opportunities in low risk sectors, Mr Altschwager said in an unstable global economic environment investors looking for “a safe haven” were increasingly embracing opportunities in Australian rural and agribusiness, which is traditionally seen as a low yielding investment with long-term consistent capital growth.